With months of speculation finally being put to bed by the calling of a UK general election, it might be expected that businesses would be more optimistic, given the period of uncertainty it will bring to an end. However, new research from Eden McCallum suggests that a majority of leaders are pessimistic on the national economic outlook.
When Conservative Prime Minister Rishi Sunak announced that the UK would be going to the polls on July 4th 2024, parts of his speech were drowned out by D:Ream’s 90s hit, ‘Things Can Only Get Better’. The music sounded by the boombox of nearby protestor Steve Bray was the anthem which became synonymous with the 1997 landslide electoral win of Tony Blair’s Labour Party.
Source: Eden McCallum Business Outlook Survey
But with polls heavily suggesting that Labour is heading for another big win this year, it seems businesses are a long way from agreeing ‘Things Can Only Get Better’. Despite the Party having spent years courting the business lobby and attempting to show it would not threaten corporate interests if it should come to power, a new poll from Eden McCallum suggests many bosses are still wary of the coming change.
In the second quarter of 2024, the survey found that 58% of businesses are still to some degree pessimistic about the domestic economic outlook. While this is still much more optimistic than their perception in the last quarter of 2022 – amid a sustained cost-of-living crisis, massive inflation, geo-political uncertainty, and the fact the incumbent government had more than up to two years before its term expired – it suggests that a majority of firms are not expecting a quick fix from whoever is sitting in Number 10, at the end of July.
Source: Eden McCallum Business Outlook Survey
When asked what was worrying them most about the domestic outlook, a growing number of respondents said the political picture was concerning them. With geo-political conflicts escalating in Eastern Europe and the Middle East, the number of leaders noting this as a threat to the UK economy has risen by 7% since the end of 2023. At the same time, the legacy of Brexit – including the new trade barriers the incumbent government installed this year – are expected to take a toll, with leaders noting that rising by 6% And pressures in domestic politics are also concerns held by 43% of businesses now – up from 36% at the turn of the year.
While Keir Starmer might have campaigned against Brexit throughout its implementation, the Labour Party has since jettisoned that outlook under his leadership – suggesting that things may not drastically change in relation to trade barriers with the EU. Critics have argued similar points around a number of other policy promises which he has since distanced the Party from. As such, even a definitive election result – usually noted by businesses as a cause for confidence – might do little to boost morale.
With that being said, however, as always business leaders are bullish about their own outlooks. A long-standing trend, particularly in Eden McCallum’s surveys of UK sentiment, is that bosses rate their own chances better than those of their competitors. And that is no different here – with 72% of leaders saying they were optimistic of their chances. That includes 16% who are very optimistic. That stands in stark contrast to just a few months earlier. In the final quarter of 2023, 57% of businesses were optimistic, suggesting that suddenly 15% of bosses do see brighter days ahead.
Source: Eden McCallum Business Outlook Survey
Ultimately, this is also because there are lots of factors at play which do not even relate to the political picture.
Speaking on the findings, Dena McCallum, co-founder of Eden McCallum, commented that UK business leaders are displaying a kind of “sober optimism” as they look forward to likely trading conditions over the next couple of years.
She added, “While there is clearly relief that inflationary pressures are finally receding, and the chances of lower interest rates over the medium term look good, it is too soon to be celebrating. Businesses remain under pressure, and the global outlook is uncertain. It is encouraging, however, that individual leaders seem optimistic about their own business’s prospects.”
Gen AI
The report also found, for example, that amid the continued hype around productivity boosts and cost savings from AI, more than half of companies are piloting or exploring use cases for generative AI in 2024.